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Implementing Health Reform: Waiting Periods For Employer-Sponsored Health Insurance



February 22nd, 2014

On February 20, 2014, the Departments of Labor, Treasury, and Health and Human Services released a joint final rule to implement an Affordable Care Act provision prohibiting self-insured and insured group health plans from requiring employees to wait more than 90 days before health insurance becomes effective.  The final regulation also contains amendments to pre-existing Health Insurance Affordability and Accountability Act regulations to bring them into ACA compliance.

The three agencies also released on February 20 a proposed rule addressing the relationship between orientation programs and the 90-day waiting period.

The Joint Final Rule On Waiting Periods

Waiting periods before health insurance becomes effective are quite common in employer-sponsored insurance.  The agencies estimate based on information from the Kaiser Family Foundation/Health Research and Education Trust 2013 employee benefits report that nine percent of new employees, or about 459,000 in 2013, were subject to waiting periods of 4 months or more and may thus be affected by this rule; however, as discussed below, the rule does not necessarily mean that all employees hired will get coverage within 90 days.

The prohibition against waiting periods in excess of 90 days applies both to grandfathered and non-grandfathered plans beginning in January, 2014.  The final rule is effective as to all plans after January 1, 2015.  Prior to that time plans must comply with either the final rule or the earlier proposed rule, which in most respects is the same as the final rule.

The ninety-day rule is basically pretty simple.  Employers are not required to offer health insurance, although large employers might owe a tax if they fail to offer coverage to full-time employees and one of their employees end up receiving premium tax credits.  If employers offer coverage, however, they may not require an employee to wait more than 90 days before coverage begins.  Ninety days is 90 days, not three months, and coverage must become effective no later than the 90th day, even though it falls on a weekend or holiday.  Employees may be allowed to wait more than 90 days before electing coverage, but they cannot be required to wait a longer time.

Non-time-based requirements.  But there are complications.  First, the rule does not prohibit the imposition of other requirements that must be met before coverage begins, such as being in a particular job classification, achieving a job-related licensure status, or completing a bona fide orientation program. The rule only prohibits time-based requirements that exceed 90 days.

Variable-hour employees.  Second, there is the situation of “variable hour employees,” employees who are not hired as full-time employees but may turn out to be full-time.  As under the employer mandate rules, an employer can wait for the length of a measurement period of up to a year before a determination needs to be made if an employee is full time (or meets some lesser hours of service requirement that would qualify the employee for health insurance coverage.)

The employer cannot simply tack a 90-day waiting period to the end of the measuring period, however.  If an employer uses a measuring period, coverage must be made effective no later than 13 months after the employee’s start date.  If the start date does not begin on the first day of a calendar month, the employer can add the number of days between the start date and the first day of the next calendar month to the 13-month period.

Hours of service requirements.  Employers may also impose cumulative hours of service requirements before the 90-day waiting period begins, as long as the cumulative hours of service required do not exceed 1200 hours.  This requirement can only be applied once on a new hire, and not reapplied on an annual basis.   Employees who are terminated and then rehired, or who move from a job classification that is not covered to one that is, may be subjected to a waiting period if the practice is reasonable under the circumstances and not used as a subterfuge to avoid the rule.

Collectively bargained multiemployer plans.  The rule recognizes the complexities of coverage eligibility conditions under collectively bargained multiemployer plan and permits the operation of these conditions as long as they are not designed to avoid compliance with the 90-day waiting period limit.

Insurers that insure employee plans can rely on the representations of employers as to employee eligibility for coverage as long as the insurer has no specific knowledge that the employer is violating the 90 day maximum requirement.

Finally, the final rule updates a number of HIPAA coverage rules to accommodate changes made by the ACA.  Most significantly, it recognizes that certificates of creditable coverage are no longer necessary because preexisting condition exclusions have been abolished by the ACA, and thus drops the requirement for creditable coverage certificates.  It does not drop the requirement until December 31, 2014, as plans are not subject to the preexisting condition ban until they begin a new plan year after January 1, 2014.

The Proposed Rule On Waiting Periods And Orientation Programs

The proposed regulation would allow employers to require the completion of bona fide orientation periods prior to the beginning of the 90-day waiting period.  The orientation period could be used for orientation and training and also for a trial period to determine whether an employee is suitable for a job.  An orientation period may not last more than one month.   The one-month period is determined by adding one calendar month and subtracting one calendar day, measured from an employee’s start date in a position eligible for coverage.

For  example, if an employee’s start date is February 21, the last permitted day of an orientation period is March 20.  If there is not a corresponding day in the next calendar month, the last permitted day for an orientation period is the last day of the month.  For example, if an employee begins work on January 31, the last day of orientation would be February 28.  If an employee begins work on the first day of a calendar month, the orientation period cannot last beyond the final day of that month.

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5 Responses to “Implementing Health Reform: Waiting Periods For Employer-Sponsored Health Insurance”

  1. timothy jost Says:

    Not sure I understand the question, but the maximum waiting period is 90 days. An orientation period of one month may be added to this. Other eligibility requirements may also be imposed as long as they are not time-based waiting periods.

  2. Art Russett Says:

    Timothy
    If the company states you are not eligible for coverage for the first 6 months, it’s actually 6 months + 90 days.
    Shouldn’t the max. period be 30 + 90?

  3. timothy jost Says:

    The waiting period regulation defines “waiting period” as “the period that must pass before coverage for an individual who is otherwise eligible to enroll under the terms of a group health plan can become effective.” I suppose that the employee in the scenario you set out is being offered coverage at the end of the waiting period, and to that extent the employer is in compliance. It is likely, however, that the coverage is not affordable, thus permitting the employee to enroll in coverage through the exchange with premium tax credits and exposing the employer to an annual $3000 per employee fine for the period the enrollee is without an offer of affordable coverage, assuming the employee is a full-time employee and the employer large employer.

  4. Art Russett Says:

    Example:

    Person hired 8/1/2014, company offers insurance at the COBRA rate for 6 months, then subsidized rate thereafter.

    Does the 90 day period include all the days worked since Aug 2014? When must the company offer the subsidized rate?

  5. Minivet Says:

    Now that the explicit goal is universal coverage (except for the undocumented who still apparently don’t count as people, but anyway), is there a clear answer in the structure of the ACA to how people get access to health care in this three-month waiting period? Are Exchange premium tax credits unambiguously available for people in this stage?

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